Comparison of efficiency characteristics between the banking sectors of US and UK during the global financial crisis of 2007–2011
Comparison of efficiency characteristics between the banking sectors of US and UK during the global financial crisis of 2007–2011
This paper investigates the effect of bad or good news (asymmetric effect) on the time-varying betas of firms in the banking industries of the UK and the US during good periods (booms) and bad periods (recessions). Daily data from eleven UK and US firms of different sizes from the banking industries are applied in the empirical tests. The data ranges from 2004 to 2011, which includes the global financial crisis of 2007–2011. The time-varying betas are created by means of the bivariate BEKK GARCH model and then linear regressions are applied to test for the asymmetric effect of news on the beta. The asymmetric effects are investigated based on both market and non-market shocks. We find that most banks in the UK and the US seem to support the market efficiency hypothesis during both periods. The level of market efficiency however seems to decline significantly from the pre-crisis to the crisis period. These results shed light on the level of market efficiency and hedging strategies.
106-116
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Jayasekera, L.I.R.
9524bb12-e1ac-4914-a34a-8fd76e72809f
December 2012
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Jayasekera, L.I.R.
9524bb12-e1ac-4914-a34a-8fd76e72809f
Choudhry, Taufiq and Jayasekera, L.I.R.
(2012)
Comparison of efficiency characteristics between the banking sectors of US and UK during the global financial crisis of 2007–2011.
International Review of Financial Analysis, 25, .
(doi:10.1016/j.irfa.2012.09.002).
Abstract
This paper investigates the effect of bad or good news (asymmetric effect) on the time-varying betas of firms in the banking industries of the UK and the US during good periods (booms) and bad periods (recessions). Daily data from eleven UK and US firms of different sizes from the banking industries are applied in the empirical tests. The data ranges from 2004 to 2011, which includes the global financial crisis of 2007–2011. The time-varying betas are created by means of the bivariate BEKK GARCH model and then linear regressions are applied to test for the asymmetric effect of news on the beta. The asymmetric effects are investigated based on both market and non-market shocks. We find that most banks in the UK and the US seem to support the market efficiency hypothesis during both periods. The level of market efficiency however seems to decline significantly from the pre-crisis to the crisis period. These results shed light on the level of market efficiency and hedging strategies.
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Published date: December 2012
Organisations:
Southampton Business School
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Local EPrints ID: 348156
URI: http://eprints.soton.ac.uk/id/eprint/348156
ISSN: 1057-5219
PURE UUID: b8bb9172-b656-4431-841a-68ee261081da
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Date deposited: 07 Feb 2013 13:59
Last modified: 15 Mar 2024 03:06
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L.I.R. Jayasekera
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